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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): August 25, 2022
 
VMWARE, INC.
(Exact name of registrant as specified in its charter)
 
Delaware 001-33622 94-3292913
(State or Other Jurisdiction
of Incorporation)
 (Commission
File Number)
 (IRS Employer
Identification Number)
 
3401 Hillview AvenuePalo AltoCA 94304
(Address of Principal Executive Offices) (Zip code)
Registrant’s telephone number, including area code: (650) 427-5000

N/A
(Former Name or Former Address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A common stockVMWNew York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐



Item 2.02 Results of Operations and Financial Condition.
On August 25, 2022, VMware issued a press release announcing its financial results for the quarter ended July 29, 2022 (“Press Release”). The Press Release, which includes information regarding VMware’s use of non-GAAP financial measures, is attached hereto as Exhibit 99.1 and is incorporated by reference herein.
The information in this Item 2.02 and Exhibit 99.1 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act ”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, regardless of any general incorporation language in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
99.1 Press release of VMware, Inc. announcing financial results dated August 25, 2022    





SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
   VMware, Inc.
 
 
Date: August 25, 2022By: /s/ Zane Rowe
   Zane Rowe
Chief Financial Officer and Executive Vice President
 

 



Exhibit 99.1

VMware Reports Fiscal Year 2023 Second Quarter Results
Total Revenue growth of 6% year-over-year
Subscription and SaaS Revenue of $943 million, an increase of 22% year-over-year


PALO ALTO, Calif., August 25, 2022 — VMware, Inc. (NYSE: VMW), a leading innovator in enterprise software, today announced financial results for the second quarter of fiscal year 2023:

Quarterly Review

Revenue for the second quarter was $3.34 billion, an increase of 6% from the second quarter of fiscal 2022.

The combination of subscription and SaaS and license revenue was $1.74 billion for the second quarter, an increase of 15% from the second quarter of fiscal 2022.

Subscription and SaaS revenue for the second quarter was $943 million, an increase of 22% year-over-year, constituting 28% of total revenue for the quarter.

Subscription and SaaS ARR for the second quarter was $3.89 billion, an increase of 24% year-over-year.

GAAP net income for the second quarter was $347 million, or $0.82 per diluted share, down 16% per diluted share compared to $411 million, or $0.97 per diluted share, for the second quarter of fiscal 2022. Non-GAAP net income for the second quarter was $697 million, or $1.64 per diluted share, down 6% per diluted share compared to $739 million, or $1.75 per diluted share, for the second quarter of fiscal 2022.1

GAAP operating income for the second quarter was $566 million, an increase of 8% from the second quarter of fiscal 2022. Non-GAAP operating income for the second quarter was $965 million, an increase of 5% from the second quarter of fiscal 2022.

Operating cash flow for the second quarter was $397 million. Free cash flow for the second quarter was $284 million.

RPO for the second quarter totaled $12.10 billion, up 8% year-over-year.

“We are pleased with our performance in Q2. Our momentum continues next week at VMware Explore where we will showcase new innovative offerings while also highlighting how we are helping customers continue to transform their businesses,” said Raghu Raghuram, CEO, VMware. “We remain committed to helping organizations unlock the full potential of multi-cloud.”

“Our Q2 financial results reflect the continued commitment of the entire VMware team to accelerate innovation for our customers as they move to a multi-cloud environment,” said Zane Rowe, executive vice president and CFO, VMware. “Investments in our Subscription and SaaS offerings helped contribute to ARR growth of 24% year-over-year.”

Business Highlights & Strategic Announcements

VMware unveiled VMware vSphere+ and VMware vSAN+ to help organizations bring the benefits of the cloud to their existing on-premises infrastructure with no disruption to their workloads or hosts.
VMware became an Official Partner of the McLaren Formula 1 Team. VMware multi-cloud solutions will help McLaren operate with speed and drive confidence no matter where the team is racing in the world.
VMware and HCL Technologies announced the formation of HCL’s new dedicated VMware Business Unit, designed to unlock the untapped value of multi-cloud and app modernization. The new unit combines the power of HCL’s CloudSMART Framework with VMware Cross-Cloud services to help enterprises accelerate cloud transformation, scale cloud-native platform operations and empower hybrid workforces.
VMware and Wipro Limited announced an expanded collaboration that will enable customers to achieve the cloud freedom they desire with the enterprise control they require as they execute their digital strategies.



VMware was named the 2022 HPE Global Technology Partner of the Year, recognizing VMware as an HPE partner that exemplifies commitment and success in delivering value to customers on their digital transformation journey.
VMware received the 2021 Google Cloud Technology Partner of the Year Award for Infrastructure Modernization, recognizing VMware for its achievements as part of the Google Cloud ecosystem in helping mutual customers accelerate their enterprise cloud transformation.
VMware received industry analyst recognition:
VMware has been positioned as a Leader in three recent IDC MarketScape reports related to the Unified Endpoint Management (UEM) space2: WW UEM Software 2022 Vendor Assessment, WW UEM Software for Apple Devices 2022 Vendor Assessment, WW UEM Software for Ruggedized/Internet of Things Device Deployments 2022 Vendor Assessment.
VMware was named a Visionary in the 2022 Gartner® Magic Quadrant™ for Application Performance Monitoring and Observability3 for its observability platform, Tanzu Observability by Wavefront. VMware has been recognized for its vision and execution. Organizations are increasingly adopting multi-cloud strategies and modern application development to meet the requirements of being a modern digital business.
VMware posted its 2022 Environmental Social and Governance (ESG) Report and 2022 Diversity, Equity and Inclusion (DEI) Report, continuing to enhance ESG disclosures.
VMware has recently been recognized for human capital commitments by ranking as a Top 100 U.S. company supporting healthy families and communities by JUST Capital.
VMware received a 100% score on the 2022 Disability Equality Index and being recognized as a Best Place to Work for Disability Inclusion by Disability:IN and AAPD for the second year in a row.
VMware recently joined more than 80 companies in supporting the development of the IFRS Sustainability Disclosure Standards, underlying the importance of better standardization and transparency in ESG disclosures for the investor community.

1 Our annual estimated tax rate is based upon, among other things, current tax law regarding the impacts of Internal Revenue Code Section 174 (“Section 174”) research and development expense capitalization, which became effective beginning VMware’s fiscal 2023. Although the U.S. Congress continues to consider various legislative options that would defer the amortization requirement to later years, the financial results for the six months ended July 29, 2022 reflect the impact of the tax law in effect as of July 29, 2022. The provided estimated tax adjustment range, in the table accompanying this release, reflects the non-GAAP adjustment we would expect should the capitalization provisions of Section 174 be deferred or repealed with effect for fiscal 2023.

2 IDC MarketScape: Worldwide Unified Endpoint Management Software 2022 Vendor Assessment (doc #US48325122, May 2022); IDC MarketScape: Worldwide Unified Endpoint Management Software for Apple Devices 2022 Vendor Assessment (doc #US48325222, May 2022); IDC MarketScape: Worldwide Unified Endpoint Management Software for Ruggedized/Internet of Things Device Deployments 2022 Vendor Assessment (doc #US48325322, May 2022)

3 Gartner, Inc., Magic Quadrant for Application Performance Monitoring and Observability, Padraig Byrne and Gregg Siegfried, 07 June 2022. Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner’s research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose. Gartner and Magic Quadrant are registered trademarks and service marks of Gartner, Inc. and/or its affiliates in the U.S. and internationally and is used herein with permission. All rights reserved.


# # #

About VMware
VMware is a leading provider of multi-cloud services for all apps, enabling digital innovation with enterprise control. As a trusted foundation to accelerate innovation, VMware software gives businesses the flexibility and choice they need to build the future. Headquartered in Palo Alto, California, VMware is committed to building a better future through the company’s 2030 Agenda. For more information, please visit vmware.com/company.




Definitive Agreement to be Acquired by Broadcom
VMware has entered into a definitive agreement to be acquired by Broadcom Inc. (“Broadcom”). The transaction, which is expected to be completed in Broadcom's fiscal year 2023, is subject to the receipt of regulatory approvals and other customary closing conditions, including approval by VMware shareholders. Please refer to the May 26, 2022 announcement entitled, “Broadcom to Acquire VMware for Approximately $61 Billion in Cash and Stock,” available on news.vmware.com.

Additional Information
VMware’s website is located at vmware.com, and its investor relations website is located at ir.vmware.com. VMware’s goal is to maintain the investor relations website as a portal through which investors can easily find or navigate to pertinent information about VMware, all of which is made available free of charge. The additional information includes: materials that VMware files with the SEC; announcements of investor conferences, speeches and events at which its executives talk about its products, services and competitive strategies; webcasts of its earnings calls, investor conferences and events (archives of which are also available for a limited time); additional information on its financial metrics, including reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures; press releases on quarterly earnings, product and service announcements, legal developments and international news; corporate governance information; ESG (environmental, social and governance) information; other news, blogs and announcements that VMware may post from time to time that investors may find useful or interesting; and opportunities to sign up for email alerts and RSS feeds to have information pushed in real time.

VMware, vSphere+, vSAN+, Tanzu, and Wavefront are registered trademarks or trademarks of VMware, Inc. or its subsidiaries in the United States and other jurisdictions. All other marks and names mentioned herein may be trademarks of their respective organizations.

Use of Non-GAAP Financial Measures
Reconciliations of non-GAAP financial measures to VMware’s financial results as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. For a description of these non-GAAP financial measures, including the reasons management uses each measure, please see the section of the tables titled “About Non-GAAP Financial Measures.”

Annual Recurring Revenue (“ARR”)
ARR is an operating measure VMware uses to assess the strength of the Company’s subscription and SaaS offerings. ARR is a performance metric and should be viewed independently of, and not as a substitute for or combined with, revenue and unearned revenue. ARR represents the annualized value of VMware’s committed customer subscription and SaaS contracts as of the end of the reporting period, assuming any contract that expires during the next 12 months is renewed on its existing terms, except that, for consumption-based subscription and SaaS offerings, ARR represents the annualized quarterly revenue based on revenue recognized for the current reporting period.

Forward-Looking Statements
This press release contains forward-looking statements including, among other things, statements regarding the expected benefits to customers and partners of VMware’s strategy and offerings, as well as the proposed acquisition of VMware by Broadcom and related timing of its consummation. These forward-looking statements are subject to the safe harbor provisions created by the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors, including but not limited to: (1) the satisfaction of the conditions precedent to consummation of the proposed acquisition, and the ability to consummate the proposed acquisition, on a timely basis or at all; (2) business disruption following the announcement of the proposed transaction, including disruption of current plans and operations; (3) the effects of the proposed acquisition, the spin-off of VMware from Dell and changes in VMware’s and Dell’s commercial relationships and go-to-market strategy, on VMware’s ability to (a) enter into, maintain and extend strategically effective partnerships, collaborations and alliances (b) maintain and establish new relationships with customers, partners and suppliers, and (c) maintain operating results and its business generally; (4) difficulties in retaining and hiring key personnel and employees, including due to the proposed acquisition; (5) the ability to implement plans, forecasts and other expectations with respect to the business after the completion of the proposed acquisition and realize synergies; (6) the impact of the COVID-19 pandemic on VMware’s operations, financial condition, VMware’s customers, the business environment and global and regional economies; (7) the ability of VMware to adapt its offerings, business operations and go-to-market activities to changes in how customers consume information technology resources, such as through subscription and SaaS offerings; (8) changes to VMware’s and Dell’s respective financial conditions and strategic directions, including potential effects of the proposed acquisition



of VMware by Broadcom, that could adversely impact the VMware-Dell commercial relationship and collaborations; (9) the continued risk of litigation and regulatory actions, including the outcome of any legal proceedings related to the proposed acquisition; (10) adverse changes in general economic or market conditions; (11) delays or reductions in consumer, government and information technology spending, including due to the announced acquisition; (12) competitive factors, such as pricing pressures, industry consolidation, entry of new competitors into the industries in which VMware competes, as well as new product and marketing initiatives by VMware’s competitors; (13) rapid technological changes in the virtualization software and cloud, end user, edge security and mobile computing and telecom industries; (14) the uncertainty of VMware’s customers’ acceptance of and ability to transition to emerging technologies and new offerings and computing strategies in the industries in which VMware competes; (15) VMware’s ability to protect its proprietary technology; (16) changes to product and services development timelines; (17) risks associated with cyber-attacks, information security and data privacy; (18) disruptions resulting from key management changes; (19) risks associated with international sales, such as fluctuating currency exchange rates and increased trade barriers; (20) changes in VMware’s financial condition; and (21) other business effects, including those related to industry, market, economic, political, regulatory and global health conditions. These forward-looking statements are made as of the date of this press release, are based on current expectations and are subject to uncertainties and changes in condition, significance, value and effect as well as other risks detailed in documents filed with the Securities and Exchange Commission, including VMware’s most recent reports on Form 10-K and Form 10-Q and current reports on Form 8- K that VMware may file from time to time, which could cause actual results to vary from expectations. VMware assumes no obligation to, and does not currently intend to, update any such forward-looking statements after the date of this release.

Contacts:
Paul Ziots
VMware Investor Relations
pziots@vmware.com
650-427-3267
Michael Thacker
VMware Global PR
mthacker@vmware.com
650-427-4454


VMware, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(amounts in millions, except per share amounts, and shares in thousands)
(unaudited)
Three Months EndedSix Months Ended
July 29,July 30,July 29,July 30,
2022202120222021
Revenue:
License$796 $738 $1,369 $1,384 
Subscription and SaaS943 776 1,842 1,516 
Services1,597 1,624 3,213 3,232 
Total revenue3,336 3,138 6,424 6,132 
Operating expenses(1):
Cost of license revenue39 37 74 75 
Cost of subscription and SaaS revenue196 170 387 327 
Cost of services revenue369 352 744 689 
Research and development803 775 1,577 1,483 
Sales and marketing1,080 1,023 2,134 1,981 
General and administrative276 256 527 492 
Realignment— 
Operating income566 525 974 1,084 
Investment income
Interest expense(74)(49)(145)(99)
Other income (expense), net(20)(30)(19)
Income before income tax479 480 807 967 
Income tax provision132 69 218 131 
Net income$347 $411 $589 $836 
Net income per weighted-average share, basic$0.82 $0.98 $1.40 $1.99 
Net income per weighted-average share, diluted$0.82 $0.97 $1.39 $1.98 
Weighted-average shares, basic422,002 419,355 421,294 419,235 
Weighted-average shares, diluted424,125 422,802 423,561 422,419 
__________
(1) Includes stock-based compensation as follows:
Cost of license revenue$— $— $$
Cost of subscription and SaaS revenue11 11 
Cost of services revenue25 24 48 49 
Research and development146 150 278 277 
Sales and marketing93 81 174 153 
General and administrative41 33 81 64 




VMware, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in millions, except per share amounts, and shares in thousands)
(unaudited)
July 29,January 28,
20222022
ASSETS
Current assets:
Cash and cash equivalents$3,242 $3,614 
Short-term investments— 19 
Accounts receivable, net of allowance of $9 and $10
2,073 2,297 
Due from related parties1,267 1,438 
Other current assets636 598 
Total current assets7,218 7,966 
Property and equipment, net1,550 1,461 
Deferred tax assets5,986 5,906 
Intangible assets, net589 714 
Goodwill9,598 9,598 
Due from related parties189 199 
Other assets2,863 2,832 
Total assets$27,993 $28,676 
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable$208 $234 
Accrued expenses and other2,683 2,806 
Unearned revenue6,388 6,479 
Due to related parties202 132 
Total current liabilities9,481 9,651 
Long-term debt11,181 12,671 
Unearned revenue4,843 4,743 
Income tax payable253 242 
Operating lease liabilities889 927 
Due to related parties802 909 
Other liabilities404 409 
Total liabilities27,853 29,552 
Contingencies
Stockholders’ equity (deficit):
Class A common stock, par value $0.01; authorized 2,500,000 shares; issued and outstanding 422,622 and 418,808 shares
Additional paid-in capital435 — 
Accumulated other comprehensive loss(13)(5)
Accumulated deficit(286)(875)
Total stockholders’ equity (deficit)140 (876)
Total liabilities and stockholders’ equity (deficit)$27,993 $28,676 




VMware, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
Three Months EndedSix Months Ended
July 29,July 30,July 29,July 30,
2022202120222021
Operating activities:
Net income$347 $411 $589 $836 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 302 275 590 544 
Stock-based compensation311 293 593 555 
Deferred income taxes, net(37)17 (80)(31)
(Gain) loss on equity securities and disposition of assets, net(3)(12)37 
Other— 
Changes in assets and liabilities, net of acquisitions:
Accounts receivable(453)(189)222 206 
Other current assets and other assets(175)(229)(418)(390)
Due from related parties(621)(162)180 522 
Accounts payable(3)(31)70 
Accrued expenses and other liabilities345 412 (319)(218)
Income taxes payable41 (110)114 (29)
Unearned revenue366 138 24 
Due to related parties(23)— (38)— 
Net cash provided by operating activities397 864 1,402 2,130 
Investing activities:
Additions to property and equipment(113)(87)(219)(157)
Sales of investments in equity securities— 26 20 34 
Purchases of strategic investments— (6)(8)(7)
Proceeds from disposition of assets84 90 
Business combinations, net of cash acquired, and purchases of intangible assets(1)(6)(4)(15)
Net cash used in investing activities(30)(72)(121)(144)
Financing activities:
Proceeds from issuance of common stock124 139 
Repayment of term loan(750)— (1,500)— 
Repurchase of common stock— (358)(89)(729)
Shares repurchased for tax withholdings on vesting of restricted stock(111)(186)(205)(242)
Principal payments on finance lease obligations(1)(1)(2)(2)
Net cash used in financing activities(857)(537)(1,672)(834)
Net increase (decrease) in cash, cash equivalents and restricted cash(490)255 (391)1,152 
Cash, cash equivalents and restricted cash at beginning of the period3,762 5,667 3,663 4,770 
Cash, cash equivalents and restricted cash at end of the period$3,272 $5,922 $3,272 $5,922 
Supplemental disclosures of cash flow information:
Cash paid for interest$59 $50 $140 $97 
Cash paid for taxes, net114 166 184 204 
Non-cash items:
Changes in capital additions, accrued but not paid$16 $$$11 



VMware, Inc.
GROWTH IN REVENUE PLUS SEQUENTIAL CHANGE IN UNEARNED REVENUE
(in millions)
(unaudited)
Growth in Total Revenue Plus Sequential Change in Unearned Revenue
Three Months Ended
July 29,July 30,
20222021
Total revenue, as reported$3,336 $3,138 
Sequential change in unearned revenue(1)
365 138 
Total revenue plus sequential change in unearned revenue$3,701 $3,276 
Change (%) over prior year, as reported13 %
Growth in License and Subscription and SaaS Revenue Plus Sequential Change in Unearned License and Subscription and SaaS Revenue
Three Months Ended
July 29,July 30,
20222021
Total license and subscription and SaaS revenue, as reported$1,739 $1,514 
Sequential change in unearned license and subscription and SaaS revenue(2)
281 148 
Total license and subscription and SaaS revenue plus sequential change in unearned license and subscription and SaaS revenue$2,020 $1,662 
Change (%) over prior year, as reported22 %
__________
(1) Consists of the change in total unearned revenue from the preceding quarter. Total unearned revenue consists of current and non-current unearned revenue amounts presented in the condensed consolidated balance sheets. 
(2) Consists of the change in unearned license and subscription and SaaS revenue from the preceding quarter. 
REMAINING PERFORMANCE OBLIGATIONS
(in millions)
(unaudited)
Growth in Remaining Performance Obligations
July 29,July 30,
20222021
Remaining performance obligations(3)
$12,103 $11,201 
Change (%) over prior year%
Remaining performance obligations, current(4)
$6,767 $6,249 
Change (%) over prior year%
__________
(3) Remaining performance obligations represent the aggregate amount of the transaction price in contracts allocated to performance obligations not delivered, or partially undelivered, as of the end of the reporting period. Remaining performance obligations include unearned revenue, multi-year contracts with future installment payments and certain unfulfilled orders against accepted customer contracts at the end of any given period.
(4) Current remaining performance obligations represent the amount expected to be recognized as revenue over the next twelve months.



VMware, Inc.
SUPPLEMENTAL UNEARNED REVENUE SCHEDULE
(in millions)
(unaudited)
July 29,April 29,January 28,October 29,July 30,April 30,
202220222022202120212021
Unearned revenue as reported:
License $20 $20 $19 $17 $20 $16 
Subscription and SaaS2,952 2,671 2,669 2,238 2,208 2,064 
Services
Software maintenance6,903 6,877 7,208 6,773 6,916 6,957 
Professional services1,356 1,298 1,326 1,205 1,194 1,163 
Total unearned revenue$11,231 $10,866 $11,222 $10,233 $10,338 $10,200 




VMware, Inc.
RECONCILIATION OF GAAP TO NON-GAAP DATA
For the Three Months Ended July 29, 2022
(amounts in millions, except per share amounts, and shares in thousands)
(unaudited)
GAAPStock-Based
Compensation
Employer
Payroll Taxes
on Employee
Stock Transactions
Intangible
Amortization
Realignment
Charges
Acquisition, Disposition
and Other
Items
Tax
Adjustment
(1)
Non-GAAP
As Adjusted
(2)
Operating expenses:
Cost of license revenue$39 — — (9)— — — $30 
Cost of subscription and SaaS revenue$196 (6)— (36)— — — $154 
Cost of services revenue$369 (25)— — — — — $343 
Research and development $803 (146)(1)(3)— — — $654 
Sales and marketing $1,080 (93)(3)(15)— — — $971 
General and administrative $276 (41)— — — (15)— $219 
Realignment$— — — (7)— — $— 
Operating income $566 311 63 15 — $965 
Operating margin(2)
17.0 %9.3 %0.1 %1.9 %0.2 %0.4 %— 28.9 %
Other income (expense), net(3)
$(20)— — — — (3)— $(21)
Income before income tax$479 311 63 12 — $877 
Income tax provision$132 47 $180 
Tax rate(2)
27.6 %20.5 %
Net income$347 311 63 12 (47)$697 
Net income per weighted-average share, diluted(2)(4)
$0.82 $0.73 $0.01 $0.15 $0.02 $0.03 $(0.11)$1.64 
__________
(1) Non-GAAP financial information for the quarter is adjusted for a tax rate equal to our annual estimated tax rate on non-GAAP income. This rate is based on our estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating the non-GAAP financial measures presented above as well as significant tax adjustments. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenue and expenses, changes to our corporate structure and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities.
(2) Totals may not sum, due to rounding. Operating margin, tax rate and net income per weighted average share information are calculated based upon the respective underlying, non-rounded data.
(3) Non-GAAP adjustment to other income (expense), net includes gains or losses on investments in equity securities, whether realized or unrealized.
(4) Calculated based upon 424,125 diluted weighted-average shares of common stock.



VMware, Inc.
SUPPLEMENTAL RECONCILIATION OF GAAP TO NON-GAAP DATA
IMPACT OF INTERNAL REVENUE CODE SECTION 174
For the Three Months Ended July 29, 2022
(amounts in millions, except per share amounts, and shares in thousands)
(unaudited)
GAAP
Tax Adjustment (1)
Non-GAAP
As Adjusted
Estimated Tax Adjustment Excluding Section 174 Impact (2)
Non-GAAP As Adjusted
Excluding Section 174 Impact (3)
Income before income tax$479$877 $877
Income tax provision$132 $47 $180 $(35)-(44)$145 -136
Tax rate (4)
27.6 %20.5 %16.5 -15.5%
Net income$347 $697 $732 -741
Net income per weighted-average share, diluted (4)(5)
$0.82 $1.64 $1.73 -1.75
__________
(1) Non-GAAP financial information for the quarter is adjusted for a tax rate equal to our annual estimated tax rate on non-GAAP income. This rate is based on our estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating the non-GAAP financial measures presented above as well as significant tax adjustments. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenue and expenses, changes to our corporate structure and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities.
(2) Our annual estimated tax rate is based upon, among other things, current tax law regarding the impacts of Internal Revenue Code Section 174 (“Section 174”) research and development expense capitalization, which became effective beginning in VMware’s fiscal 2023. Although the U.S. Congress is considering various legislative options that would defer the capitalization requirement to later years and such possible deferral was considered in our full year guidance provided on February 28, 2022, the financial results for the three months ended July 29, 2022 reflect the impact of the tax law in effect as of July 29, 2022. The provided estimated tax adjustment range reflects the non-GAAP adjustment we would expect should the capitalization provisions of Section 174 be deferred or repealed with effect for fiscal 2023.
(3) Represents the estimated non-GAAP results excluding the impact of Section 174 capitalization under the tax law in effect as of July 29, 2022.
(4) Totals may not sum, due to rounding. Tax rate and net income per weighted average share information are calculated based upon the respective underlying, non-rounded data.
(5) Calculated based upon 424,125 diluted weighted-average shares of common stock.



VMware, Inc.
RECONCILIATION OF GAAP TO NON-GAAP DATA
For the Three Months Ended July 30, 2021
(amounts in millions, except per share amounts, and shares in thousands)
(unaudited)
GAAPStock-Based
Compensation
Employer
Payroll Taxes
on Employee
Stock Transactions
Intangible
Amortization
Acquisition, Disposition
and Other
Items
Tax
Adjustment
(1)
Non-GAAP
As Adjusted
(2)
Operating expenses:
Cost of license revenue$37 — — (10)— — $27 
Cost of subscription and SaaS revenue$170 (5)— (43)— — $121 
Cost of services revenue$352 (24)(1)— — — $326 
Research and development$775 (150)(1)(2)— — $622 
Sales and marketing$1,023 (81)(3)(22)— — $919 
General and administrative$256 (33)(1)— (23)— $199 
Operating income$525 293 77 23 — $924 
Operating margin(2)
16.7 %9.3 %0.2 %2.4 %0.7 %— 29.4 %
Other income (expense), net(3)
$— — — — $
Income before income tax$480 293 77 24 — $880 
Income tax provision$69 71 $141 
Tax rate(2)
14.4 %16.0 %
Net income$411 293 77 24 (71)$739 
Net income per weighted-average share, diluted for Classes A and B(2)(4)
$0.97 $0.69 $0.02 $0.18 $0.06 $(0.17)$1.75 
__________
(1) Non-GAAP financial information for the quarter is adjusted for a tax rate equal to our annual estimated tax rate on non-GAAP income. This rate is based on our estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating the non-GAAP financial measures presented above as well as significant tax adjustments. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenue and expenses, changes to our corporate structure and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities.
(2) Totals may not sum, due to rounding. Operating margin, tax rate and net income per weighted average share information are calculated based upon the respective underlying, non-rounded data.
(3) Non-GAAP adjustment to other income (expense), net includes gains or losses on investments in equity securities, whether realized or unrealized.
(4) Calculated based upon 422,802 diluted weighted-average shares for Classes A and B.



VMware, Inc.
RECONCILIATION OF GAAP TO NON-GAAP DATA
For the Six Months Ended July 29, 2022
(amounts in millions, except per share amounts, and shares in thousands)
(unaudited)
GAAPStock-Based
Compensation
Employer
Payroll Taxes
on Employee
Stock Transactions
Intangible
Amortization
Realignment
Charges
Acquisition, Disposition
and Other
Items
Tax
Adjustment
(1)
Non-GAAP
As Adjusted
(2)
Operating expenses:
Cost of license revenue$74 (1)— (19)— — — $54 
Cost of subscription and SaaS revenue$387 (11)— (73)— — — $303 
Cost of services revenue$744 (48)(1)— — — — $695 
Research and development$1,577 (278)(1)(5)— — — $1,293 
Sales and marketing$2,134 (174)(3)(32)— — — $1,925 
General and administrative$527 (81)(1)— — (28)— $417 
Realignment$— — — (7)— — $— 
Operating income$974 593 129 28 — $1,737 
Operating margin(2)
15.2 %9.2 %0.1 %2.0 %0.1 %0.4 %— 27.0 %
Other income (expense), net(3)
$(30)— — — — (12)— $(41)
Income before income tax$807 593 129 16 — $1,559 
Income tax provision$218 101 $320 
Tax rate(2)
27.0 %20.5 %
Net income$589 593 129 16 (101)$1,239 
Net income per weighted-average share, diluted(2)(4)
$1.39 $1.40 $0.01 $0.30 $0.02 $0.04 $(0.24)$2.93 
__________
(1) Non-GAAP financial information for the quarter is adjusted for a tax rate equal to our annual estimated tax rate on non-GAAP income. This rate is based on our estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating the non-GAAP financial measures presented above as well as significant tax adjustments. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenue and expenses, changes to our corporate structure and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities.
(2) Totals may not sum, due to rounding. Operating margin, tax rate and net income per weighted average share information are calculated based upon the respective underlying, non-rounded data.
(3) Non-GAAP adjustment to other income (expense), net includes gains or losses on investments in equity securities, whether realized or unrealized.
(4) Calculated based upon 423,561 diluted weighted-average shares of common stock.




VMware, Inc.
SUPPLEMENTAL RECONCILIATION OF GAAP TO NON-GAAP DATA
IMPACT OF INTERNAL REVENUE CODE SECTION 174
For the Six Months Ended July 29, 2022
(amounts in millions, except per share amounts, and shares in thousands)
(unaudited)
GAAP
Tax Adjustment (1)
Non-GAAP
As Adjusted
Estimated Tax Adjustment Excluding Section 174 Impact (2)
Non-GAAP As Adjusted
Excluding Section 174 Impact (3)
Income before income tax$807$1,559 $1,559
Income tax provision$218 $101 $320 $(62)-(78)$257 -242
Tax rate (4)
27.0 %20.5 %16.5 -15.5%
Net income$589 $1,239 $1,302 -1,317
Net income per weighted-average share, diluted (4)(5)
$1.39 $2.93 $3.07 -3.11
__________
(1) Non-GAAP financial information for the quarter is adjusted for a tax rate equal to our annual estimated tax rate on non-GAAP income. This rate is based on our estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating the non-GAAP financial measures presented above as well as significant tax adjustments. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenue and expenses, changes to our corporate structure and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities.
(2) Our annual estimated tax rate is based upon, among other things, current tax law regarding the impacts of Internal Revenue Code Section 174 (“Section 174”) research and development expense capitalization, which became effective beginning in VMware’s fiscal 2023. Although the U.S. Congress is considering various legislative options that would defer the capitalization requirement to later years and such possible deferral was considered in our full year guidance provided on February 28, 2022, the financial results for the six months ended July 29, 2022 reflect the impact of the tax law in effect as of July 29, 2022. The provided estimated tax adjustment range reflects the non-GAAP adjustment we would expect should the capitalization provisions of Section 174 be deferred or repealed with effect for fiscal 2023.
(3) Represents the estimated non-GAAP results excluding the impact of Section 174 capitalization under the tax law in effect as of July 29, 2022.
(4) Totals may not sum, due to rounding. Tax rate and net income per weighted average share information are calculated based upon the respective underlying, non-rounded data.
(5) Calculated based upon 423,561 diluted weighted-average shares of common stock.



VMware, Inc.
RECONCILIATION OF GAAP TO NON-GAAP DATA
For the Six Months Ended July 30, 2021
(amounts in millions, except per share amounts, and shares in thousands)
(unaudited)
GAAPStock-Based
Compensation
Employer
Payroll Taxes
on Employee
Stock Transactions
Intangible
Amortization
Realignment
Charges
Acquisition, Disposition
and Other Items
Tax
Adjustment
(1)
Non-GAAP
As Adjusted
(2)
Operating expenses:
Cost of license revenue$75 (1)— (20)— — — $54 
Cost of subscription and SaaS revenue$327 (11)— (85)— — — $231 
Cost of services revenue$689 (49)(1)— — — — $639 
Research and development$1,483 (277)(1)(4)— — — $1,200 
Sales and marketing$1,981 (153)(4)(45)— — — $1,779 
General and administrative$492 (64)(1)— — (45)— $383 
Realignment$— — — (1)— — $— 
Operating income$1,084 555 154 45 — $1,846 
Operating margin(2)
17.7 %9.1 %0.1 %2.5 %— %0.7 %— 30.1 %
Other income (expense), net(3)
$(19)— — — — 36 — $17 
Income before income tax$967 555 154 81 — $1,765 
Income tax provision$131 152 $282 
Tax rate(2)
13.5 %16.0 %
Net income$836 555 154 81 (152)$1,483 
Net income per weighted-average share, diluted for Classes A and B(2)(4)
$1.98 $1.31 $0.02 $0.36 $— $0.19 $(0.36)$3.51 
__________
(1) Non-GAAP financial information for the quarter is adjusted for a tax rate equal to our annual estimated tax rate on non-GAAP income. This rate is based on our estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating the non-GAAP financial measures presented above as well as significant tax adjustments. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenue and expenses, changes to our corporate structure and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities.
(2) Totals may not sum, due to rounding. Operating margin, tax rate and net income per weighted average share information are calculated based upon the respective underlying, non-rounded data.
(3) Non-GAAP adjustment to other income (expense), net includes gains or losses on investments in equity securities, whether realized or unrealized.
(4) Calculated based upon 422,419 diluted weighted-average shares for Classes A and B.




VMware, Inc.
REVENUE BY TYPE
(in millions)
(unaudited)
Three Months EndedSix Months Ended
July 29,July 30,July 29,July 30,
2022202120222021
Revenue:
License$796 $738 $1,369 $1,384 
Subscription and SaaS943 776 1,842 1,516 
Total license and subscription and SaaS1,739 1,514 3,211 2,900 
Services:
Software maintenance1,299 1,336 2,609 2,657 
Professional services298 288 604 575 
Total services1,597 1,624 3,213 3,232 
Total revenue$3,336 $3,138 $6,424 $6,132 
Percentage of revenue:
License23.9 %23.5 %21.3 %22.6 %
Subscription and SaaS28.2 %24.7 %28.7 %24.7 %
Total license and subscription and SaaS52.1 %48.2 %50.0 %47.3 %
Services:
Software maintenance38.9 %42.6 %40.6 %43.3 %
Professional services9.0 %9.2 %9.4 %9.4 %
Total services47.9 %51.8 %50.0 %52.7 %
Total revenue100.0 %100.0 %100.0 %100.0 %



VMware, Inc.
REVENUE BY GEOGRAPHY
(in millions)
(unaudited)
Three Months EndedSix Months Ended
July 29,July 30,July 29,July 30,
2022202120222021
Revenue:
United States$1,648 $1,539 $3,166 $3,005 
International1,688 1,599 3,258 3,127 
Total revenue$3,336 $3,138 $6,424 $6,132 
Percentage of revenue:
United States49.4 %49.1 %49.3 %49.0 %
International50.6 %50.9 %50.7 %51.0 %
Total revenue100.0 %100.0 %100.0 %100.0 %



VMware, Inc.
RECONCILIATION OF GAAP CASH FLOWS FROM OPERATING ACTIVITIES
TO FREE CASH FLOWS
(A NON-GAAP FINANCIAL MEASURE)
(in millions)
(unaudited)
Three Months EndedSix Months Ended
July 29,July 30,July 29,July 30,
2022202120222021
GAAP cash flows from operating activities$397 $864 $1,402 $2,130 
Capital expenditures(113)(87)(219)(157)
Free cash flows$284 $777 $1,183 $1,973 




VMware, Inc.
About Non-GAAP Financial Measures

To provide investors and others with additional information regarding VMware’s results, VMware has disclosed in this earnings release the following non-GAAP financial measures: non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, non-GAAP net income per diluted share, free cash flow, non-GAAP income tax provision as adjusted for the impact of Internal Revenue Code Section 174 (“Section 174”) and non-GAAP revenue as adjusted for the impact of the suspension of our business operations in Russia and foreign currency. VMware has provided a reconciliation of each non-GAAP financial measure used in this earnings release to the most directly comparable GAAP financial measure. Other than free cash flow, non-GAAP income tax provision as adjusted for the impact of Section 174 and non-GAAP revenue as adjusted for the impact of the suspension of our business operations in Russia and foreign currency, these non-GAAP financial measures differ from GAAP in that they exclude stock-based compensation, employer payroll taxes on employee stock transactions, amortization of acquired intangible assets, realignment charges, acquisition, disposition and other items, and discrete items that impacted our GAAP tax rate, each as discussed below. Our non-GAAP financial measures also reflect the application of our non-GAAP tax rate. Free cash flow differs from GAAP cash flow from operating activities with respect to the treatment of capital expenditures.

VMware’s management uses these non-GAAP financial measures to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, for short- and long-term operating plans, to calculate bonus payments and to evaluate VMware’s financial performance, the performance of its individual functional groups and the ability of operations to generate cash. Management believes these non-GAAP financial measures reflect VMware’s ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in VMware’s business, as they exclude charges and gains that are not reflective of ongoing operating results. Management also believes that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating VMware’s operating results and future prospects in the same manner as management and in comparing financial results across accounting periods and to those of peer companies. Additionally, management believes information regarding free cash flow provides investors and others with an important perspective on the cash available to make strategic acquisitions and investments, to repurchase shares, to fund ongoing operations and to fund other capital expenditures.

Management believes these non-GAAP financial measures are useful to investors and others in assessing VMware’s operating performance due to the following factors:

Stock-based compensation. Stock-based compensation is generally fixed at the time the stock-based instrument is granted and amortized over a period of several years. Although stock-based compensation is an important aspect of the compensation of VMware’s employees and executives, the expense for the fair value of the stock-based instruments VMware utilizes may bear little resemblance to the actual value realized upon the vesting or future exercise of the related stock-based awards. Management believes it is useful to exclude stock-based compensation in order to better understand the long-term performance of VMware’s core business.

Employer payroll taxes on employee stock transactions. The amount of employer payroll taxes on stock-based compensation is dependent on VMware’s stock price and other factors that are beyond VMware’s control and do not correlate to the operation of the business.

Amortization of acquired intangible assets. A portion of the purchase price of VMware’s acquisitions is generally allocated to intangible assets, such as intellectual property, and is subject to amortization. However, VMware does not acquire businesses on a predictable cycle. Additionally, the amount of an acquisition’s purchase price allocated to intangible assets and the term of its related amortization can vary significantly and are unique to each acquisition. Therefore, VMware believes that the presentation of non-GAAP financial measures that adjust for the amortization of intangible assets provides investors and others with a consistent basis for comparison across accounting periods.

Realignment charges. Realignment charges include workforce reductions, asset impairments, losses on asset disposals and costs to exit facilities. VMware’s management believes it is useful to exclude these items, when significant, as they are not reflective of VMware’s core business and operating results.

Acquisition, disposition and other items. As VMware does not acquire or dispose of businesses on a predictable cycle and the terms of each transaction can vary significantly and are unique to each transaction, VMware believes it is useful to exclude acquisition, disposition and other items when looking for a consistent basis for comparison across accounting periods. These items include:
Direct costs of acquisitions and dispositions, such as transaction and advisory fees.
Costs associated with integrating acquired businesses.



VMware, Inc.
Accruals for the portion of merger consideration payable in installments that may be paid in cash or VMware stock, at the option of VMware.
Gains or losses on investments in equity securities, whether realized or unrealized.
Charges recognized for non-recoverable strategic investments or gains recognized on the disposition of strategic investments.
Gains or losses on sale or disposal of distinct lines of business or product offerings, or transactions with features similar to discontinued operations, including recoveries or charges recognized to adjust the fair value of assets that qualify as “held for sale.”
Certain costs incurred related to VMware's spin-off from its former parent company, Dell Technologies Inc., completed on November 1, 2021, such as legal and advisory fees.
Certain costs incurred related to VMware's pending acquisition by Broadcom Inc. ("Broadcom"), such as legal and advisory fees incurred to effect the acquisition. The acquisition is expected to occur in Broadcom's fiscal year 2023 and is subject to the receipt of regulatory approvals and other customary closing conditions, including approval by VMware shareholders.

Tax adjustment. Non-GAAP financial information for the quarter is adjusted for a tax rate equal to VMware’s annual estimated tax rate on non-GAAP income. This rate is based on VMware’s estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating VMware’s non-GAAP income as well as significant tax adjustments. VMware’s estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that VMware management believes materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenue and expenses, changes to our corporate structure and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to VMware’s estimated annual tax rates as described above, the estimated tax rate on non-GAAP income may differ from the GAAP tax rate and from VMware’s actual tax liabilities.

Additionally, VMware’s management believes that the non-GAAP financial measure of free cash flow is meaningful to investors because management reviews cash flow generated from operations after taking into consideration capital expenditures due to the fact that these expenditures are considered to be a necessary component of ongoing operations.

VMware’s management also believes that the non-GAAP income tax provision as adjusted for the impact of Section 174 research and development expense capitalization, which became effective beginning with VMware’s fiscal 2023, is meaningful to investors, given that the U.S. Congress is considering various legislative options that would defer the capitalization requirement to later years, possibly with effect for fiscal 2023.

Further, VMware’s management believes that the non-GAAP revenue as adjusted for the impact of the suspension of our business operations in Russia and foreign currency is meaningful to investors due to the unexpected impacts of Russia’s invasion of Ukraine on VMware’s business operations in the quarter as well as changes in foreign currency exchange rates versus our expectations.

The use of non-GAAP financial measures has certain limitations because they do not reflect all items of income and expense that affect VMware’s operations. Specifically, in the case of stock-based compensation, if VMware did not pay out a portion of its compensation in the form of stock-based compensation and related employer payroll taxes, the cash salary expense included in operating expenses would be higher, which would affect VMware’s cash position. VMware compensates for these limitations by reconciling the non-GAAP financial measures to the most comparable GAAP financial measures. These non-GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from, measures prepared in accordance with GAAP and should not be considered measures of VMware’s liquidity. Further, these non-GAAP measures may differ from the non-GAAP information used by other companies, including peer companies, and therefore comparability may be limited.
Management encourages investors and others to review VMware’s financial information in its entirety and not rely on a single financial measure.